Gold edges higher on weaker dollar, North Korea fears

By Peter Hobson

LONDON (Reuters) - Gold prices edged higher on Wednesday, underpinned by tensions over North Korea, as investors looked ahead to U.S. inflation data on Thursday that should give clues about the pace of U.S. interest rate rises.

Gold also benefited from weakness in global stocks, the dollar and U.S. bond yields. A weaker dollar makes gold cheaper for holders of other currencies, while lower bond yields reduce the opportunity cost of holding non-yielding bullion.

Spot gold was up 0.1 percent at $1,332.80 an ounce at 1147 GMT after touching $1,322.15 on Tuesday, the lowest since Sept. 1.

U.S. gold futures for December delivery were 0.3 percent higher at $1,337.20 an ounce.

Demand for gold, seen as a safe investment in uncertain times, revived after U.S. President Donald Trump pledged stronger measures against North Korea and Pyongyang promised to fight off what it said was the threat of a U.S. invasion.

Investors were taking advantage of a fall in prices from last Friday's 13-month high of $1,357,54, said Robin Bhar, head of metals analysis at Societe Generale.

"Geopolitical trouble hasn't disappeared and the U.S. political landscape is still fraught with difficulties," he said. "When gold drops almost $40, a lot of investors see that as a good level at which to buy back in."

The market was looking ahead to U.S. inflation data at 1230 GMT on Thursday after a run of weak inflation lowered expectations the Federal Reserve will raise rates in December.

Gold is highly sensitive to rising rates because they increase bond yields and tend to boost the dollar.

"We'd have to see inflation really soaring to shake the market out of its current mindset," said Bhar. "While that mindset continues, gold will get good dip buying support."

Investors in gold-backed exchange-traded funds (ETFs) were buying as prices fell. Holdings of the largest gold-backed ETF, New York's SPDR Gold Trust, rose 0.35 percent on Tuesday from Monday.

Technical fibonacci support for gold was at $1,321.60 and prices should continue to rise if they can stay above that level, analysts at ScotiaMocatta said in a note.

In other precious metals, silver was flat at $17.90 an ounce.

Platinum was 0.1 percent lower at $985.90 an ounce and palladium was down 0.8 percent at $947.25.

(Additional reporting by Apeksha Nair in Bengaluru; editing by Susan Thomas and David Clarke)